Solar FIT Cut

The subsidy for solar power is to be cut in half for new installations from 12 December 2011, the government has said.

It means consumers who register for the scheme after that date – even if they have already paid a deposit – will see their return halved.

The government has launched a fast-track consultation on the change, but says it reflects falling panel prices.

The new tariff of 21 pence, down from the current 43p, will take effect from 1 April and be paid to anyone who installed their solar system after 12 December.

Speaking in an emergency debate at the House of Commons, Climate Change Minister Gregory Barker said the government risked running out of money by next year.

“Falling PV costs mean returns are double those originally envisaged for this scheme, this does not provide value for money, if we don’t act now the entire £867m budget would be fully committed within the next few months,” said Mr Barker.

The new tariff would bring the UK more in line with subsidy levels in Germany, he added.

Mr Barker also outlined plans to limit installations to homes that have already carried out energy-efficiency measures.

But the scale and timing of the cut has angered the solar industry, which says it will lead to job losses.

“I’ve talked to some companies who are looking at pulling the plug in weeks – it probably reduces the size of the industry by 15,000-20,000 jobs,” said Ray Noble from the Renewable Energy Association (REA).

Companies are expecting a rush of consumers, who have already placed orders, demanding to have their systems installed and connected in the next five weeks. Many may fail to get it done in time.

The current FIT subsidy pays households to generate electricity from solar power at 43p per kilowatt hour, around four times what consumers pay for their electricity.

As a result, figures from Ofgem show the amount of solar power installed in the UK has increased dramatically, from 30 megawatts (MW) before the subsidy started in 2010 to 321MW by October this year.

There have been 90,000 domestic installations under the scheme so far, and the REA claims thousands more are booked, but not yet completed.

The faster-than-expected growth has put pressure on the subsidy’s finances and has already triggered one review of the tariff, which reduced subsidies for larger, non-domestic projects.

Read the full details on the DECC website here, where Mr Barker also notes:
“My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn’t fall victim to boom and bust.
The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme.”